The government's lawsuit to block Oracle's acquisition plans is focused on the impact on the top-tier market, but the judge in the case raised concerns Wednesday about how smaller niche companies would be affected as well.

U.S. District Court Judge Vaughn R. Walker said he was concerned about the connection between the government's market definitions of enterprise resource planning (ERP) tools -- human resource management or financial management services -- and Oracle's traditional database products.

While the Judge did say he was about ten years behind the times when it comes to how software vendors are identifying themselves these days, he did want to make sure that certain aspects of the market were not being negatively impacted.

Redwood Shores, Calif.-based Oracle is currently bidding $9.4 billion to purchase Pleasanton, Calif.-based PeopleSoft . The Department of Justice ((DoJ) is seeking to stop the deal, citing anti-trust concerns. The case of The United States et al vs. Oracle is scheduled to go to trial on June 7.

"Nobody is going to dispute that there are a ton of vendors in the mid-market," Judge Walker said during a pre-trial court appearance in San Francisco. "If you look at the multi-faceted organizations that are out there, this is really not of an interest of the government but more of a protection of third parties."

Mergers and acquisitions attorney and analyst Ken Marlin of Marlin & Associates said the DoJ has not only taken a very narrow definition of the market, but one that is in the wrong direction.

"The DoJ is looking at people who are manufacturing software as a suite today, which in this case is Oracle, PeopleSoft and SAP," Marlin told internetnews.com. "Oracle and some other players are saying you have to look at the broader market. Oracle, for example, says their customers can disassemble the package and are not tied down to just their solution. If it is too expensive their customers could walk away.

Marlin added, "The broad issue is market definition and the DoJ's argument is too narrow. Take the auto industry, for example. Is Ferrari a market leader in its niche or is it a market leader when compared to Ford or GM? So the court is going to be put in a position where they have to have a firm hand on the definition of the market that Oracle works in first."

The mid-tier issue was also raised in two pre-trial motions discussed Wednesday. Both sides argued over the so-called "Discount Forms," which Oracle uses in selling software and services; as well as the potentially sensitive company information being supplied to the DoJ for its case against Oracle.

Judge Walker split the decision saying that Oracle had to supply two years' worth of its "Discount Forms" documentation no matter how small, but did allow Oracle's legal team to review any evidence the DoJ presents from a pool of 33 different Oracle competitors and customers including PeopleSoft and potentially Microsoft , IBM and other mid-tier players.

The third parties have until March 16 to remove their corporate information from the DoJ's legal arguments.

Yankee Group senior analyst Mike Dominy says the real impact of Oracle's trial will be right above the small-to-medium-sized business sector but below the large tier vendors.

"There are implications for mid-market players like Microsoft as well as IBM with this case," Dominy told internetnews.com. "Some companies are running Microsoft, others have legacy platforms such as IBM. But there are a lot of really niche vendors in that space that serve one or two vertical markets like Epicor and Made2Manage.

Giga Research Director Paul Hamerman says addressing the broader market is something that is certainly part of Oracle's strategy.

"To gain share in the market with companies below $500 million in revenues is something Oracle is targeting in the long-term but they haven't penetrated it just yet. I've studied this market and the only other vendor that would come into play here would be someone like Lawson Software," Hamerman said. "They're a $400 million company that does financial and HR, targeting healthcare and retail. In the bigger markets there just really isn't much competition besides SAP. In the smaller and mid-tier markets there is Microsoft even though it has no specific financial applications."

For now, the mid-tier questions were left unanswered by Oracle and the DoJ during the hearing. Judge Walker scheduled a March 19 phone conference to give lawyers a chance to respond. Both sides are expected to be back in the courtroom April 16 to set additional pre-trial motion dates.